In many countries, traditional life insurance products include a fixed percentage guarantee on each year's return. This article presents a model for the valuation of life insurance contracts including a guaranteed minimum return. The model is based on the notion of no arbitrage opportunities...

Consider a traditional life insurance contract paid with a single premium. In addition to mortality factors, the relationship between the fixed amount of benefit and the single premium depends on the interest rate (calculation rate). The calculation rate can be interpreted as the average rate...

This article integrates aspects of traditional insurance with advances in financial economics, yielding proper valuation and premium assessments of insurance benefits linked to various financial assets. Several new types of unit-linked life insurance contracts are discussed with substantial...

Dual holders own debt and equity in the same firm. By maximizing the total value of the dual holders' assets, we derive optimal default policies and show that dual holdership reduces default risk. We analyze the two most common priority structures: 1) Dual holders' private debt rank junior to...

High bank leverage is commonly considered a major threat to financial stability. We build a structural credit model to calculate the optimal leverage for a bank that provides asset backed loans, such as corporate loans and mortgages. The bank's assets are loans, which means that the bank's...

Issuances in the USD 260 Bn global market of perpetual risky debt are often motivated by capital requirements for financial institutions. We analyze callable risky perpetual debt emphasizing an initial protection ('grace') period before the debt may be called. The total market value of debt...